Won't sell stock to repay Cairn debt, says Agarwal

Vedanta Resources Plc, the mining company that agreed to buy control of oil explorer Cairn India Ltd, said it won’t sell shares to repay the $6.5 billion of debt used to finance the deal.

Vedanta is borrowing the money for at least two years to take a stake of as much as 40 per cent in Cairn India. Sesa Goa Ltd, an iron ore producer in which Vedanta has a majority stake, will pay cash for 20 per cent of Cairn India. Vedanta’s earnings before interest, tax, depreciation and amortisation (Ebitda) will be more than $5.5 billion this year, helping it to repay the debt, Chairman Anil Agarwal said.

“We are in a very comfortable position,” Agarwal, who founded the company and is the controlling investor, said yesterday in a Bloomberg Television interview at his home in London. “If necessary, we can roll over (debt) and get a refinancing.”

Vedanta, which mines copper and zinc and smelts aluminium, agreed to pay as much as $9.6 billion for as much as 60 per cent of Cairn India to diversify into oil with the Mangala field in Rajasthan. London-based Vedanta also plans further expansion in oil and gas using Cairn India’s exploration expertise.

“I will allocate funds for them whatever their plans are, whether they go to India’s various places or go to Sri Lanka or go to Africa,” Agarwal said.

In May, Vedanta said Ebitda for its financial year ended March 31 rose 42 per cent to $2.3 billion.

Credit-default swaps linked to Vedanta debt climbed 116 basis points to 649 yesterday, according to data provider CMA, the highest since May. Swaps are used to speculate on a company’s ability to repay debt and rise when perceptions of credit quality deteriorate.